Malaysia Economy and Economic Policy

Malaysia Boleh! Malaysia We Can!

2010-05-18T16:33:00.000-07:00

By Tan Thai Soon

Little birds do not need assistance, yet its survive;
Many individuals received assistance, yet they failed;

We need courage, not privilege;
We need challenge, not reliance;

From personal finance to corporate finance;
From local finance to global finance;

Malaysia Boleh!, Malaysia We Can!

Poverty eradication - An economic and social needs for national transformation

2010-03-25T04:26:00.000-07:00

By Tan Thai Soon

1. Poverty eradication should be based on economic and social needs, rather than based on ethnicity (majority or minority) or political power (national or states).

2. Poverty eradication that based on ethnicity and political factors always lead to inefficiency and ineffectiveness. This could results in some poor ethnic groups and some states become less develops.

3. "Ethnicity plays an ambiguous role in the great transformation" (Bates, 1999)

4. Poverty eradication through education systems and social reforms helps to transform the economic resources into human capital resources; for national transformation we need to maximize all possible human capital resources.

5. Malaysian economy urgently need a new model (policy) and new concept (implementation).

The 3 elements of Proactive Economic Policy

2009-09-27T03:22:00.000-07:00

By Tan Thai Soon

The 3 elements of proactive economic policy require an integrated roles of 3 important economic structures includes government, people and corporation. Each structures are responsible to perform an independent but integrated roles as follows:

a) Policy is the responsibility of the Government;
b) Implementation is the responsibility of People; and
c) Society is the responsibility of Corporate citizen.

The independent, but integrated roles are proactive, forward looking, and sustainable.

A Strategic Proactive Economic Policy In Challenging Times - Malaysian Perspective

2009-07-01T06:36:00.001-07:00

By Tan Thai Soon

Introduction

The implementation of New Economic Policy (NEP) in Malaysia in the 1970s and 1980s have brought many success stories and it has been a policy to be emulated by many developing countries . The policy have to certain extent help to re-distribute the low and middle income group.

However, with the rapid development of globalised economy. These self-restrictive policy have posed much constraint on our economic growth, hinded Malaysian effort to become a develop country and slow down our income per capital. The situation is even more critical in 2000s, with the emergent of new markets, likes China as a manufacturing power house, India as a ICT hub, and Vietnam as a new international investment destination. It is now more competitive, harder and more difficult in drawing FDI into Malaysia.

Malaysia needs a new "Strategic Proactive" Economic Policy (Datuk Nazir Tun Razak, 4 February 2009) and a "new route to economic sustainability".

Malaysian Prime Minister Datuk Seri Najib Razak has announced some major changes to the NEP as follows.

Foreign Investment Committee (FIC) Guidelines

1. FIC guidelines covering the acquisition of equity stakes, mergers and takeovers is repealed.

Comment
FIC guidelines have long been regarded as hinded effort to attract foreign investors. In this current globalise economic environment, a self-restrictive policies will reduce our competitiveness.Malaysian need a strategic proactive policies to move forward; to actively involve in strategic mergers and acquisition; to form a strategic partnership; and to joint a strategic business alliance.

The abolishment of FIC guideline will help to attact foreign investors to Malaysia. The foreign direct investment in Malaysia will bring in monetary resources, manufacturing skills, information technology, ICT outsourcing industry, bio-technology, human resource and better education systems.

2. FIC requirement, for companies going for IPO, for bumiputra equity requirement (30%) is removed.

Comment
FIC requirement of bumiputra (30%) in public companies did not help bumiputra to become more entrepreneur, rather they prefer to cash out for quick gains or become speculators in share trading. Some select to increase their shares financing during good time, however during financial crisis, they got into financial dificulty.

The mere ownership of sharehoding does not made a holders to be an entrepreneur, but the actual business skills do.

3. As for acquisition of properties, FIC will only process transactions involving dilution of bumiputra interests (i.e. by sale of property by bumiputra to non-bumiputra) and government interest in property. However, FIC approval is only required for properties above RM20 million whether bought directly or indirectly. All other transactions will no longer require the approval of FIC.

4. The treshold for purchase of properties by foreigners is increased in general to RM500,000. Above the treshold, foreigners will no longer need to refer to FIC for the purchase of properties.

Conclusion

Malaysian Prime Minister Datuk Seri Najib Razak has make a difficult policy decision. As he has puts it " policies not in line with international practice will constrain growth" (The Star, 1 July 2009). He emphasized further that Malaysian need to " escape from the middle-income trap" (New Straits Times, 1 July 2009).

Malaysian Stimulus Packages

2009-06-14T06:49:00.000-07:00

Malaysian Stimulus Packages

A special website to monitor the implementation of the economic stimulus packages. The website covers the implementation programmes, includes:-

a) The number of projects
b) The allocations and the amount spent
c) The progress of the projects

To visit the official website on Malaysian stimulus packages,
please click at http://www.rangsanganekonomi.treasury.gov.my/index.php?lang=en

Malaysia Economy In The Global Environment - An economic landscape

2009-02-11T02:50:00.000-08:00

By Tan Thai Soon

The intention of this site is to provides some insights and the contrasting views on the economic policies and measures, and to highlight issues that would affect local and foreign investors in Malaysia. The following are some interesting topics and challenging issues that related to Malaysia economy:

The rise and fall of the Keynesian fiscal policy and the Friedman monetary policy;
The see-saw views of nationalization and privatization;
The understanding of deflation and inflation;
The equation of rate of interest, saving and reinvestment.
The issues of capital control, free flotation or currency manipulation;
The short term financial assistance and long term wealth creation and preservation;
The issues on global competition and international co-operation through joint-venture and strategic alliances;
The post independent New Economic Policy and Strategic Proactive Economic Policy in the global environment;
The development of traditional argro-industry and new bio technology;
The development of industrialize economy and knowledge economy, particularly the creativity and innovation;
The current rate of unemployment and the long term human capital management, in term of education, training, skill and professional development.

The globalization of the world economy, together with the current world economic crisis, give the policy makers a challenging tasks in this challenging times. There are many issues need to be resolved and discussed, particularly the Malaysia economy landscape need a structural change to ensure economic sustainability. Many leaders know there is a "need to change" to be competitive in the global environment:

Datuk Seri nazir Razak calls for more strategic proactive response to crisis by "review the New Economic Policy" (New Straits Times, Feb 4, 2009)
Tan Sri Muhyiddin Yassin agrees to gradually liberalise policies to "provide new avenues for foreign and local investors" to come and invest in Malaysia, but insisted this would not revamp the mainstay of the NEP (New Straits Times, Feb 11, 2009)
Steven Wong, the assistant director of ISIS Malaysia argued that "one cannot afford to subscribe to economic policies that merely cater to the moment, we must think about tomorrow" (The Star, Feb 9, 2009)
I believe the present or future leadership will have the "courage to change" to ensure economic sustainability. The role of the government is to create a "strategic proactive policy". On the other hand, government link companies and non-government link companies should play a more active roles to help the society through corporate social responsibility.

As a final notes, the success of any economy will depend on a good economic structure and policy. However, other factors such as social and political factors are equally important.

Managing Business In Good Times and Bad Times - Malaysian Experience (Part 2)

2009-02-01T17:14:00.000-08:00

By Tan Thai Soon

Super Cash Payout Vs Reinvestment

1.Introduction
The recent issues on super cash payout on "Wall Street bonus" provide a good lesson for many organizations in managing business during good times and bad times.

2. Super Cash Payout
2.1. Financial companies in New York city paid cash bonuses of US$18.4 billion in 2008 despite of record losses suffered by many financial institution.

2.2. U.S. president Barack Obama refers the hug bonuses payout by the banks represent "the height of irresponsibility"

2.3. Some observers argued that such payment system during good times and in turbulent times is not helping the institutions in the short run and long run.

2.4. Some argue the "need of change" in compensation system. I believe "Yes They Can" under the leadership of U.S. president Barack Obama.

3. Reinvestment Model-Malaysian Experience
3.1. Public Bank Berhad (PBB), one of the largest listed non-government linked corporation on Bursa Malaysia. Its financial performance on profit after tax ranging from RM330 million (1995) to RM1,450 million (2005), including a profit after tax of RM51 million in 1998 during Asia financial crisis (Datuk Paddy Bowie, 2006, p.265). In 2008 financial year end, an unaudited , PBB posted a pre-tax profit of RM3.38 billion (Business Times, Jan 20, 2009).

3.2. PBB claim to be "one of the best capitalised" bank in Malaysian, from 1980 (RM 20 million) to 2006 (RM 3.42 billion), this was done via regular bonus issues to shareholders and through the exercise of the employees' share options (Datuk Paddy Bowie, 2006, pp254-255). If a sharehoder invest RM1,000 in 1000 shares in PBB in 1967, " to-date it would have yield close to RM1.2 million for you" (Datuk Paddy Bowie, 2006, p.181).

3.3. PBB's reinvestment model benefits the bank and its stakehoders, particularly the sharehoders and employees. The bank is able to increase its market capitalisation through bonus issues, while preserve its cash reserve for expansion. As for shareholders and employees, their shareholding in PBB increased, they may decide to keep the additional shares or to liquid it in some other date through stock market.

4. Conclusion
The success story of PBB came with many contributing factors. However, the strategy of reinvestment model is a critical factor. The experience of PBB provides a good lesson to many local institutions in managing business during good times for the bad times. It is not so fortunate for some institutions in Malaysia, they need constant government assistance and restructuring during both good times and bad times.

Reference
Datuk Paddy Bowie (2006) Teh Hong Piow, A Banking Thoroughbred, Public Bank Berhad, Kuala Lumpur.

Managing Business In Challenging Times - Malaysian Experience (Part I)

2009-01-15T03:15:00.000-08:00

By Tan Thai Soon

1) Introduction

1.1) Economic Slowdown
The global financial crisis started in U.S. had spreads to Europe, Asia and the rest of the world. Malaysia economy is no exception for the following reasons:

i) The fall in demand for oil by the world major economy have resulted the fall of crude oil price from above USD 140/ barrel to below USD 40/ barrel have affected Malaysia petroluem revenue.

ii) The low demand and the fall in the palm oil price from above RM 4000/ton to below RM 2000/ton together with the drop in other commodities prices have affected Malaysian export revenue.

iii) The fall in demand from U.S. and Europe for our electronic , electrical, and manufacture goods have cause the slow down in production activities, increase idle machine time, surplus of labour forces, and thus the revenue and growth.

iv) The fall in revenue by Malaysian companies from oversea projects due to cancellation and deferment, particularly from East Asia and emerging economy, have affected the performance of many organizations in Malaysia.

1.2) In Summary
Like any other global economies, Malaysia had already facing the economy slowdown in 4th quarter of 2008, and the outlook for the current year is particularly challenging due to the above factors. The official GDP forecast for Malaysia in 2009 is 3.5%, with other research institute indicate a smaller growth at 2.5% in 2009. We should not expect a quick fix or short term recovery, but rather a medium term economic recovery cycle.

During this challenging time, the government financial assistance and more liberalise open policy would help Malaysia Government effort to overcome economy crisis in the medium term. Malaysian companies must be position and ready to export again when the global financial crisis is over. In addition, Malaysian must welcome the return and additional foreign investors into Malaysia. The present and future Malaysian leadership and vision is important to help Malaysia to recover from current recession and compete in this challenging, changing and competitive global environment.

2) Economic Policy

2.1) Fiscal Management
The government has in 2008 allocate a sum of RM7 billion stimulus package, the intention is to inject additional sum into economy particularly for infrasture, development, research & and education sectors. The initial package is by far too little to have any significant impact in the medium term economy recovery, but it does help as an immediate short term measure. The government has consider introducing further stimulate package in the near future. The speed and the amount allocate for the next stimulate package is critical in view of lose of revenue by the private sector and government link companies.

2.2) Bank Negara's Policy
Bank Negara Malaysia has adopt the low interest rate policy and statutory research requirement with intention to encourage borrowing, consumption and investment. As national income is a function of consumption, the later includes payment of wages, rental of fixed assets, and reinvestment of any profits.

Malaysian private commercial banks together with state owned financial institutions have taken the initiative by providing micro financing to the petty traders. The amounts of financing ranging from RM2,000 to RM50,000, without collateral, and quick approval within one week subject to completeness of documents. For example, Bank Simpanan National have proposed to increase its allocations for micro financing from RM50 million (2008) to RM250 million (2009). The other factor need to be considered is the cost of finance, the interest rate ranging from 10% p.a. to above 24% p.a.

However, the medium size enterprises, such as developers, contractors and traders are experiencing difficult to obtain loans, especially the bridging loans and term loans for development projects. According to one observer "Malaysian banks are not heeding the central bank's advice".

2.3. Bank Negara Soft Loan
The government may consider reintroducing "soft loan", the same package introduced in late 1980s, through Bank Negara to financial institutions, into properties development sector. This will relief the hardship of hundred of thousand of existing purchasers who saw theirs incomplete houses being abandon by the developers. At the same time, this would help to stimulate the development sector, particularly the related SMEs enterprises.

2.4. Private Development Sector
Private development sector is one of the prime mover in the economy. The Malaysian properties value is still very much lower compare to other big cities in Asia. Therefore with a more open policy by the government on property sector, we will be able to attract foreign inverstors in the medium term.

It is worth noted that, the incoming of foreign investors would help to create more revenue through investment. As the same time help to create more employment opportunities through joint ventures, transfer of technology in manufacturing, engineering and ICT sectors; help to develop our education sector; and other outsource service sector.

2.5) In Summary
The stimulus package and Bank Negara policy will no doubt benefits many Malaysian enterprises. The government with limited resources during financial crisis should focus in stimulate the economy and not to invest in the shares stocks or properties stocks, unless it involve national and public interest. As one observer rightly put it, the government should "focus on creating more value to our economy". Similarly the government can further help the local enterprises and economy by having a more open policy in investment security sector and further liberalise the Foreign Investment Committee (FIC) guidelines on property sector. Malaysia would be able to attract foreign investors in the medium term when the world economy recover.

3) Human Resource Management

During the economy slowdown, many companies when facing liquidity problem and surplus of labour force may opt for termination and retrenchment. However, if the skills workers have been retrenched, they may be lose forever. During the economy slowdown, training and retraining the idle skills workers may not be easy, partly due to the cash flow constraint.

The human resource fund set up by the human resource department play an increasing and important role during this challenging time. The government may consider additional financial assistance to encourage human resource development during this period. In addition, the existing double deduction tax incentive for approved training of employees in the specific sectors should be allowed to all organizations during this challenging time.

Training during this challenging time provides employees with motivation, leadership development, and to position themselves when the economy recover.

4) Innovation and Creativity

Innovation and creativity can help Malaysian organizations create new products and services for the new market. The sustainability of the Malaysian brands can be achieved through value innovation and continuous value innovation.

Through MSC Malaysia pre-seed fund programme, the government have help Malaysian business to fast track their business and innovative ideas through ICT. The government will provides grant of up to a maximum of RM150,000, to be utilised within 12 months upon approval of application. The programme is intended for a short period of time. However, in order to encourage Malaysian innovation and sustainable innovation, financial assistance is paramount important, government should extend the programme for longer period. In addition, the amount of grant approved should be increased.

5) Brand Management

Branding like any other types of advertisement will cost money. Many MMC have cut their advertising expenditure and sponsorship during economy slowdown. The small and medium size enterprise in Malaysia may take the advantage, during the absent of big brand name, to promote their brands and to position their products and services when the world economy recover.

The expenditure on promotion during this challenging time may not be easy. The brand promotion grant set up by Malaysian External Trade Development Corporation play an important role in helping the Malaysian businesses. The grant is for the development and promotion of brand by Malaysian businesses as follows: (i) 100% reimbursable grant of RM 1 million per company for SMEs, (ii) 50% reimbursable grant of RM 2 million per company for non-SMEs, and (iii) 100% reimbursable grant and a 50% reimbursable of up to RM 2 million per company for SMEs.

The Malaysian government should continue and increase the allocation of the grant during this challenging and difficult time. The grant would help Malaysian businesses to prepare, be ready and to position themselves when the world economy recover in the medium term.

The Global Financial Crisis - The Effects (Part I )

2009-01-09T21:39:00.000-08:00

Introduction

The global financial crisis started with the U.S. Subprime mortgage meltdown in 1997. The Subprime crisis has direct impacted the financial sector and stock market in U. S. The financial crisis started in U.S. and spreads to Europe, Asia and other developing economy.

The Effects of Financial Crisis
i) Real estate sector in crisis, with fall in the housing sector and mortgage sector in U.S.

ii) Financial sector in U.S. face an unprecedented crisis. According to former Federal Research Chairman Alan Greenspan "the system is flawed''. The major European banking sector is no exception to this crisis. The crisis also affected financial center in Asia likes Singapore and Hong Kong.

iii) The financial sector has a drastic effect in the stock market. The lack of confidence and fear by investors and shareholders have cause a fall in market capitalization of up to 40% in most market through out the world.

iv) With the shortage of liquidity and fall in sales, the U.S. car industry need a major loans to avoid bankruptcy. The export oriented Japanese cars companies have to withdrawn from the sponsorship in Formula 1 sport, and South Korea Ssangyong motor company filed for bankruptcy protection.

v) The energy and oil industries see a drastic drop in demand, the crude oil price fell from a record high of above US$140/barrel to below US$40/barrel.

vi) U.S. and Europe experiences a slow down in products sales and demand in domestic market. The decline in demand have resulted in decline in production and economy growth, with some observers predicting a short to medium term recession in the economy. The fall in products demand in U.S. and Europe have a major impact on the China and Asean manufacturing sectors. The slow down in China manufacturing sectors have resulted in low demand for raw materials and commodities from Australia, Asean and other developing countries.

vii) The demand of raw materials, such as steel, platinum, copper and zine, with the exception of gold, have fallen by 45%. The fall in demand in commodities affect many developing countries. Similarly, Malaysian has seen palm oil prices soaring to historic heights to above RM4,000 a tonne, but to drop by half within a short period of time. Indonesian is not exception to the impact of low demand in commodities.

viii) The natural results of this economy slow down has seen many financial institutions and corporations retrench and fire their staffs force , with financial sector in U.S. and Europe take the lead, and follow by the manufacturing sector in Asia and other developing countries. The unemployment rate has increase in U.S., Europe and the rest of the world.

US Subprime Mortgage Meltdown 2007

2008-10-15T07:03:00.000-07:00

US Subprime Mortgage Meltdown

1.Introduction
It is exactly ten years after the Asia Financial Crisis in 1997, US subprime mortgage crisis started in 2007. Perhaps ten year a cycle is coincident, but most peoples would agreed economy cycle is real. The financial crisis in Mexico in the 1980's, the Asia financial crisis in 1997 and the US Subprime Mortgage crisis in 2007. With the globalized financial systems, the crisis provide many opportunities for many smart hedge fund managers and short term hot capital fund. Some peoples argued that short term hedge fund speculators is not the cause of financial crisis, but most peoples would agree it can cause distability and subsequent lack of confidence in the financial systems.

2.US Economy
US economy have enjoy a boom period in the last decade, US private corporate sector are the prime mover of the economy, lead by the technology stocks and financial service sector. The movement of short-term funds into US economy immediately after the Asia financial crisis is evident by the strong US currency and stock market performance before the Subprime crisis. As a result, the US financial system are enjoying extra liquidity and money supply in the economy.

3.The Cause of the Subprime Crisis
3.1.The Lenders
With the extra liquidity in the system, the Subprime lenders have deliberate relax the lending rule and guideline and due diligence are sometime not the prime criteria for the lending institution. The unprecedent surplus supply of fund available to the mortgage providers, the lenders are prepare to lend the borrowers with poor credit record without regard to their ability to repay.

3.2. The Borrowers
The easy access of fund together with the minimum initial deposit requirement for the house purchasers have encourage the peoples to speculate in the property market beyond their mean of repayment. In addition, the lower interest rate from the lending institution have encourage the existing house owners to refinance their house. The borrowers believe that their house value could keep appreciating in value over time or at least at par with the compounding factors of rate of interest and inflation rate.

3.3.Economy Factors
With the global competition from the east asia coutries, like China and Vietnam and the emerging India as the main competitors in the technology sectors for investors, US mainland have experiencing economy down turn. This was further aggregated by the surging of crude oil price in recent years before the crisis. Some argued that financial burden in the Iraq war is also a contributing factor.

4.The Consequences
With slowing down of US economy, the borrowers start to default their loan repayment. Many of the top subprime leaders are either gone out of business or scaled down their business. The closing down of some lending institution have sent fear to the financial system with the possible lack of trust and confidence from the depositors and investors of the institution, which could in turn create a panic if without a government involment or guarantee at least in the short and medium term.

The Subprime mortgage meltdown have inevitable affecting the stock market, the price of major financial institutions got the first hit. Some economist and analyst have predict a possible short term economy recession and increase of unemployment rate in the US.

5. The Government Involvement
To restore the public confidence, particularly the depositors and investors of the financial institution is paramount important. the US government have pledged to pump US$250b into the banks through direct investment as shareholders (preference shares) of the banks. The government involvement in the private US corporations or nationalization is objectionable to many Americans, but this time in the national interest and to avoid a possible collapse of financial system, the government involvement is allow at least for a short and medium term.

Malaysian Experience In Asia Financial Crisis

2008-10-09T04:18:00.000-07:00

The Financial Crisis In Malaysia

During the Asia financial crisis in 1997, Malaysia saw its long term program to build Malaysia economy development suffer under the onslaught of currency devaluation. The currency devaluation affected the stock market so badly that Malaysia witnessed first hand the consequence of short-term money propping the stock market. There are always people to ride on a bubble. The short-term capital investors were no exception, when the ringgit denominated share asset was affected by currency devaluation everybody wanted to jump ship and dumped their ringgit assets.

The situation was exacerbated by the USD becoming stronger based on US monetary situation. The US interest rates were rising and the USD appreciated against all East Asian currencies on its own accord. The currency speculators saw an ideal situation. The ringgit depreciated by half against the USD.

The Malaysia's Specific Approach

Malaysia found the IMF proposal too difficult to absorb. The real GDP had suffered and to revive the economy there was a need to keep interest rate low. Higher taxes and lower government spending will send the economy even further down. The floating exchange rate was not helping the ringgit. However, Malaysia had good exports and enough foreign reserves. It had enjoyed good foreign direct investments which were long term capital infusion to the economy. It decided that it will be too painful to adopt IMF strategies and defending the ringgit at such a cost was though of as too high a price to pay.

Malaysia rejected the IMF offer of financial help and instead resorted to fix its currency exchange rate at RM3.8 to the USD. To stop the influence of oversea ringgit, especially that are deposited in Singapore banks it decided to make ringgit held oversea worthless after a certain date. This would stop any speculation in the ringgit outside Malaysian borders. It also decided to put some capital controls to halt any short term movement of funds, which cannot be taken out of Malaysia for a period of one year. The intention of the capital control is to immediately stabilized currency fluctuation and to revive the domestic economy. Malaysia mobilized all its internal resources to finance it recovery programmes.

This approach brought back stability to the ringgit. People knew how much they will get for their trade with Malaysian importers and exporters knew how much they will get for their exports. Short term money movements were halted. Long term foreign direct investors were protected to ensure the continued flow of FDI into the country. The government has ensure that the ringgit would continue to be readily convertible to foreign currencies for trade purposes and for direct investment by foreigners. This approach has brought success in managing the financial crisis in the short and medium term strategy.

Malaysia subsequently eased its currency controls in February 1999 when it enacted a graduated exit tax for any transfers of capital by investor before the year was up. Similarly, transfers were allowed without levy for trade purposes and for long term capital investment. Malaysia has subsequently lifted the capital control.

Asian Financial Crisis

2008-10-07T04:38:00.000-07:00

Corporate Governance in the Asian Financial Crisis

Critique on Article by Simon Johnson, Peter Boone, Alasdair Breach, Eric Friedman (2000) "Corporate Governance in the Asian Financial Crisis".

1.Introduction
The 1997-1998 Asian financial crisis have been the most traumatic financial experience in the region in recent times. It shows how vulnerable and connected of all the "emerging markets" across countries and all boundaries of today's economy. The main purpose of this article is to explain the important of the corporate governance, particularly on the minority shareholders protection, have on the extent of exchange rate depreciation and stock market decline. The purpose of the article was clearly and concisely stated and agreed with the title.

2. Summary of the Article
Specifically, the study sought to explain the measure in corporate governance have on the extent of exchange rate depreciation and stock market decline. The author argued that,the corporate governance variable provide a better explanations of the variation in exchange rates and stock market performance during the Asian financial crisis than that of macroeconomic variable, such as the budget deficit, monetary policy, the current account, foreign exchange reserves, and foreign debt.

The author's objectives were attainable, by provide enough data from 25 emerging markets. the key dependent variables were clearly stated, that is the change in the nominal exchange rate depreciation and the change in the stock market decline. these dependent variables were tested against the standard macroeconomic variables; the institutions variables; and the corporate governance variables.

The findings were well organized, sectioned and classified into testable hypothesis. The authors used tables and graphs to present the facts and findings. The main finding by the author showed that the corporate governance variable provide a better explanations of the variation in exchange rates and stock market performance during the Asian crisis than that of macroeconomic variable. Their evidence suggest the corporate governance have the significant effect on the extent of exchange rate depreciation and stock market decline in 1997-1998. The evidence thus provides an alternative explanation to the standard macroeconomic policies on the Asian financial crisis.

3. Limitations of the Article
The article came short of providing effect of inadequate supervision of the banking and financial sectors have on the financial crisis. The weaknesses of the Asia financial market system and the over lending in the real estate sector have not been tested.

4. Conclusion
The authors presented that corporate governance variables are better explanations for the Asian financial crisis than any other macroeconomic variable. Their conclusions were based on a well research and reliable data and their findings are logically stated. The strength of the article, it provides an insight of an extended and alternate theory to the standard macroeconomic theory in explaining the Asian financial crisis. However, it does not cover the effect on inadequate supervision of the banking and financial sectors have on the financial crisis. Overall, it was a very important and significant contribution to the field of research in the study of financial crisis.